Powering down! In first half of FY19, discoms report financial loss of over Rs 15,000 crore

Losses of the discoms in Telangana, Tamil Nadu, Madhya Pradesh, Assam and Andhra Pradesh more than doubled during H1FY19 over the year-ago period

The target to reduce these losses to 15% by the end of March 2019 is clearly going to be missed by a significant margin. (Representational/Reuters)

State-run electricity distribution companies (discoms) reported financial losses of over Rs 15,000 crore in the first half of this fiscal — as much as the losses incurred by them during the whole of last year (see chart) — signalling a reversal of a declining trend since the UDAY scheme for these entities’ revival was launched in November 2015 and a possible unravelling of the scheme itself.

Losses of the discoms in Telangana, Tamil Nadu, Madhya Pradesh, Assam and Andhra Pradesh more than doubled during H1FY19 over the year-ago period, according to a recent power ministry report reviewed by FE. Under UDAY, financial losses of the discoms in 27 states have fallen to Rs 15,049 crore in FY18 from Rs 36,905 crore in FY17 (Rs 51,480 crore in FY16), thanks mainly to the savings made through lower interest costs.

The UDAY scheme’s efficacy comes under a cloud also because there is stagnation with respect to the various operational parameters it was meant to improve. The aggregate technical and commercial (AT&C) losses —electricity units lost on account of pilferage — of discoms in 26 states and UTs were at 19.8% at the end of December 2018, down only 0.7 percentage point from the level recorded a year earlier.

The target to reduce these losses to 15% by the end of March 2019 is clearly going to be missed by a significant margin.

Increase in power purchase and establishment costs, low collection from remotely located consumers (especially after the household electrification drive under the Saubhagya scheme), inadequate tariff hikes, slow subsidy disbursements from the respective state governments and rising dues from the government departments have been the main reasons for the scheme losing momentum.

State governments of 16 states have taken over around Rs 2.32 lakh crore debt of their discoms as per UDAY conditions, resulting in a lowering of the interest rates to 7-8.5% from around 11-12%. Savings through lower power purchase cost, establishment cost and tariff rationalisation and improvement in billing efficiency also contributed to the loss reduction. However, these efforts are seen to be reversing with increasing penetration of electricity.

Electricity regulators not raising power tariffs according to the trajectory agreed while signing into UDAY has also added to the discoms’ pressure. Only 17 states have increased their tariffs for FY19 compared to 22 for FY18.